Colorado exempts from the state's sales and use tax all sales, storage, and use of components used in the production of alternating current electricity from a renewable energy source. Effective July 1, 2009, through July 1, 2017, all sales, storage, and use of components used in solar thermal systems are also exempt from the state's sales and use tax. The exemption for systems which produce electricity from a renewable resource includes but is not limited to photovoltaic 9PV) systems, solar thermal-electric systems, small wind systems, biomass systems, or geothermal systems.

The statute defines the components of a system eligible for the exemption; these include trackers, generating equipment, supporting structures or racks, inverters, towers and foundations, balance of system components such as wiring, control systems, switchgears, and generator step-up transformers.

The exemption only applies to ''state'' sales and use taxes -- not to sales and use taxes assessed by incorporated towns, cities and counties. However, Colorado has granted local jurisdictions the authority to exempt renewable energy equipment from sales and use taxes if a local government chooses to do so.